Agreement

By Asok Nadhani
1.5 Agreement

(i)    Agreement means an offer by one party and acceptance by another. Two or more parties must promise to perform (or not perform) some act forming consideration for each other. (S.2(e))

(ii)   Agreements are of 3 kinds:

(a)   Valid Agreement,

(b)   Void Agreement,

(c)   Illegal Agreement.

(a)   Valid Agreement:

i.      An Agreement in turn comprises following basic elements:

a.     There must be an offer from one or more parties.

b.    The offer must be accepted by other party (or parties).

c.     There must be a consideration. The consideration may be some act, abstinence, money, benefit, prevention from loss or any other non monetary benefit or advantage.

d.    It must be certain and not vague & ambiguous.

e.     The parties to the agreement must agree about the same thing (i.e., there is consensus-ad-idem). 

ii.    An agreement without any of the above essential elements is void.

(b)   Void Agreement:

i.      An agreement which is not enforceable by law is called as void agreement, or an agreement void ab initio. If an agreement does not satisfy all the essentials required for formation of a contract (as prescribed under sections 10, 29 and 56), it is called as a void agreement.

ii.    Thus, a void agreement is a nullity since very beginning. A void agreement does not create any legal obligations between the parties from the very beginning.

iii.   If both the parties to an agreement are at mistake (i.e., bilateral mistake or mutual mistake), the agreement is void.

(c)   Illegal Agreement: An agreement prohibited by any law in force is an illegal agreement. An illegal agreement is always void. Any transaction collateral to it also becomes illegal, and cannot be enforced.

For more details, refer to Mercantile Law, by A K Nadhani, BPB Publications, www.bpbonline.com